The news, which Citi revealed in a blog post Wednesday morning, followed a proposal from activist investor Arjuna Capital for Citi to go beyond reporting a figure that was recently mandated in the United Kingdom, comparing median pay for female employees with that of their male peers, and offer a global snapshot of the figure along both race and gender lines. The news was first reported by Bloomberg News.
The figure is a different way of measuring the pay gap than what’s often called pay equity, which compares the earnings of men and women who work in the same jobs. Citi said last year that women make 99 percent of what men make when adjusted for factors such as job function, level and geography, and that it would make adjustments to close that gap.
Yet Arjuna Capital is pushing for companies to reveal both figures — it plans to announce a campaign in the next few weeks targeting 12 more companies with the same request — as a way to illustrate not only whether a company treats men and women working in the same job equally but also how well they’re doing at closing the “position gap,” getting more women into the top-ranking, highest-paying jobs.
“The equal-pay-for-equal-work number on its own isn’t enough, and the median number on its own isn’t enough,” said Natasha Lamb, a managing partner at Arjuna, who applauded Citi for disclosing the figure and withdrew her shareholder proposal. “The two together tell the whole story and provides a baseline for investors to understand how the company is progressing over time and fixing the problem.”
But the new figure also makes for some highly unfavorable headlines. Lamb said Citi’s decision to publish the number — which could be misinterpreted as Citi paying women 30 percent less than men for the same job — shows both “vulnerability” and “authenticity” amid an ongoing, hot-button debate.
Sara Wechter, Citi’s head of human resources, said in an interview that the numbers were “not where they should be,” but that the firm wanted to be transparent with employees and disclosed the number now because of past commitments it had made to workers and to time it with annual compensation announcements.
“We came to the conclusion we have nothing to hide,” she said. “We want to be as transparent as possible to employees about why representation matters. It wasn’t so much about the number; it’s about the message it sends to our employee base.” It also wanted to set goals it could work to improve. Last August, Citi shared that by 2021, its goal is to increase the percentage of women in senior roles globally from 37 percent to at least 40 percent and the percentage of black employees in U.S. senior roles from 6 percent to at least 8 percent.
The surprisingly candid revelation not only demonstrates how regulations in one country can ricochet internationally in an era of global business but also serve as a reminder that diversity issues are being taken more seriously in boardrooms amid growing investor and public pressure.
The United Kingdom set a deadline last spring for firms with at least 250 U.K. employees to report on the gap between the median male employee’s and female employee’s pay, prompting the disclosure of unflattering figures that frequently showed double-digit divides. Though it has been criticized as a blunt instrument that’s hard to compare between firms, others suggested it could have a broader effect, prompting companies to publicly explain the efforts they were making to get women into higher-paying roles and promote more women so they can notch improved numbers over time.
Meanwhile, leadership diversity has become a growing issue among shareholders. Big investors such as BlackRock, Vanguard and State Street have been more vocal about diversity in the boardroom and in management. Money management firms have rolled out investment vehicles focused on women-led firms because of a demand from institutional clients such as pension funds. Proxy advisers have proposed updating how they vote for boards with little gender diversity, and some states have passed or are considering quotas on the number of women on corporate boards.
Also on Wednesday, Bloomberg News announced its 2019 Gender Equality Index, a reference for investors and public companies that highlights businesses that share more about their gender diversity and practices. This year, the percentage of companies that met its criteria doubled from the year before; the report said 60 percent of firms conduct pay reviews to close what is an average 20 percent pay gap globally.
Citigroup was also the first financial services company to share its equal pay for equal work statistics after Arjuna targeted several large banks, Lamb said, including Wells Fargo, Bank of America and JP Morgan Chase. Tech firms have also been targeted by Arjuna. Lamb would not say yet where she’s filed the new proposals, but it seems likely some of the same names will receive them.
Whether they’ll follow Citi’s lead is unclear. Brian Levine, a partner at the consulting firm Mercer who works with Citi and other financial services firms, called Citi’s move “bold” but also said it’s not “wrongheaded” to keep such figures private, given the difference that factors like markets, industry and geography can play.
“That Citi is out there will have weight, but whether it sparks a dramatic change in the disclosures of companies is not clear to me,” he said.